Jeff Ubben Leaves ValueAct For Social Investing
What’s happening? Jeff Ubben, the well-known activist investor, has left ValueAct, the hedge fund he founded, to establish another hedge fund – Inclusion Capital Partners – focusing on social impact investing, reported Billy Nauman in the Financial Times.
Why does this matter? It's significant that Ubben, the founder of a highly successful $16bn hedge fund, is signalling that companies need to do more than simply generating financial returns.
One quote that seems to have grabbed attention from the above piece is Ubben's seeming assertion that a lot of financial returns may well already be "tapped out":
"Finance is, like, done. Everybody’s bought everybody else with low-cost debt. Everybody’s maximised their margin. They’ve bought all their shares back . . . There’s nothing there. Every industry has about three players. Elizabeth Warren is right."
Last year, the FT ran a letter from Marty Lipton, one of the US’s top corporate lawyers. In his letter, Lipton warned his clients of the impending threat their businesses might face if ESG isn’t taken seriously.
Whereas shareholder activism has historically targeted achieving higher economic returns by imparting certain measures (many of which were likely welcomed by the majority of investors), targeting social and environmental returns may prove a little less popular – especially if doing so comes at the expense of profits.
It may turn out Ubben’s vision of pressuring companies to exist for the benefit of both stakeholders and shareholders meets some considerable friction until greater social and environmental commitments prove themselves as drivers of share price value. Indeed, the US Department of Labor recently proposed a rule update that would make it harder to included socially focused funds in retirement plans, suggesting they may be inappropriate if performance ranked below other investment products.
Regardless, Ubben will certainly have his backers. Affiliated Managers Group, for example, which previously held a 13-year-long relationship with ValueAct has announced it is a minority shareholder in Ubben's new venture.
Nick Finegold is Founder & CEO of Curation Corp, an emerging and peripheral risks monitoring service.
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